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Financial Reform Continued

Republicans voted last night to block financial reform from reaching the Senate floor for debate. Roben Farzad, senior writer at Bloomberg Businessweek, examines what's causing the impasse and the prospects for the bill. Plus Help Wanted blogger Lauren discusses the latest in her search for work in the financial sector, and how her Wall St. connections are reacting to the push for bank reform.

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Comments [10]

James B
from NYC

Never have so many rattled on so much about that which they understood & knew so little... If u want to know who got us into this mess, check the mirror or ask u'r neighbor if they spent the past 10 years buying what they couldn't afford, signing contracts they didn't understand or living as if there were no tomorrow (in terms of savings or debt). In our public lives, we echoed this private proflicacy as we voted for politicians who cut our taxes whilst simultaneously increasing government spending or promising more spending than we could ever reasonably afford in future. Now the party's over ... and the search for scapegoats rather than honest truth consumes our politicians who merely reflect our our self-deceptions.

Of course, they’re going to deny it. If Goldman Sachs did what it is said they did (sell products they knew were no good and making huge profits), they are going to fight it tooth and nail. Life and Wall Street has been extremely good to them and they want to keep it that way. There should be a way for the people, who like me, have lost their home to get their money back. For us, there has to be justice sometime, somewhere. Having well paid lawyers is a big help to Goldman Sachs, we all know that. I wish I had been able to hire a lawyer when my condo foreclosed. Eugenia Renskoff

People on Wall Street will always complain about the latest government regulation. While the housing bubble was inflating, everyone was whining about Sarbanes-Oxley.

Most individual Wall Street workers won't be effected one way or the other by any new regulations. One exception would be traders at big banks who were able to take tremendous risks and reap ridiculous rewards. So we might not see one guy making 50 million a year. But on the flip side, that same money might be distributed to a many traders at smaller firms.

When people on the Street complain, it's because, somewhere in their minds, they think that next year they'll be that 50 million dollar man. It's the same reason so many regular folks making $40,000 manage to worry about "over-taxed" millionaires. We all think we'll be rich some day.

By the way, there is a smoking gun on the rating agencies, as described in the latest Michael Lewis book "The Big Short".

In a court case, an analyst at S and Ps mortage department testified that his boss FORBID him to press for information crucial to the proper evaluation of the underlying mortgage pools necessary to give a proper rating to a CDO.

This whole issue of the smoking gun of the Goldman Sachs shorting their own derivatives is a minor detail of the real issue, which is that due to lack of regulation, the banks and investment houses lost $2 trillion and have successfully tranferred the debt to the taxpayer and their descendents including the ballooning debt of the recession which will be $8 trillion more over the next decade.

After graduating from law school, I worked for four years as an associate at a very prominent, very "white shoe" law firm. My working-class, Catholic background and education at CUNY and Columbia (I was a nerd) did not prepare me for the values of Wall Street, which hit me like the proverbial ton of bricks. Although by then an agnostic, I wanted to call in an exorcist. I'd never heard so many rationalize so much for the (financial) benefit of so few.

The issue is not merely whether Goldman (by now a metaphor for all the banks), should have hedged at the expense of their investors or, along with hedge funds like Magnetar (ProPublica's piece last week), deliberately built exploding deals. Wall Street claims, with some justification, that all the players know better than to trust any of the other players.

The issue is, rather, whether all of us should be compelled to play. As former President Clinton pointed out, the deals done were BIG deals that ultimately affected everyone -- pension funds, pensioners, ordinary homeowners, and the millions who are now unemployed. Not to mention the taxpayers who picked up the tab.

The fallacy in Wall Street's thinking is the belief that they are doing "god's work" (with Blankfein as the world's highest paid missionary?) and that cut-throat capitalism, deceit included, benefits the economy. In fact, while losers on Wall Street may deserve to lose, ordinary Americans who are not rich and do not work at Goldman or Cravath (not my firm) are not "losers" or "stupid," and the wealth amassed by Wall Street bankers does not create value for America as a whole. Government should act to protect the public interest -- with which the interests of Goldman Sachs do not coincide.

So playing craps in a crapshoot may be fine; but playing craps with the public's money, and my retirement fund, is not. That's the issue, and the answer is regulation.

This stuff is just one of many scams that Goldman was involved in - another was the naked short-selling of Bear Stearns stock following the closed door meeting where the Treasury exposed Bear's books to the top investment banks in the hope of finding a buyer. Instead Goldman profited by pounding the last nails into Bear's coffin.

The key issue in all this is, of course, the collusion between Goldman ( and other big investment banks) and the rating agencies to produce fraudulent ratings for the CDOs.

Why is THAT not the main focus of SEC investigations? Can anyone answer that question?

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